Rescuing Regulation is a remarkable book for six important reasons: 1) it clarifies the debate: Dibadji cuts a clear swath through the ideological and political debates separating rhetoric from substance. It clearly identifies the contours, issues and uses of the rhetoric of neo-classical economics and examines how it used to frame the debate as markets versus government. It examines critically the ideology of the regulation-deregulation debate and addresses the issue of equitable distributions. 2) It identifies the substantial issues for discussion of regulation – effective democracy, effective government for social well-being and well-functioning markets. 3) It sets out the clearly religious character of much neo-classical economic faith. 4) It provides new directions using the new insights gained from interdisciplinary research. 5) It provides a balanced historical view of issues and regulatory responses. And, 6) it is very readable, indeed, an enjoyable read about a critically important topic – rescuing regulation from the moribund ideological debates between conservatives, who believe in a neo-classical economic utopia, and those concerned about collective well-being in the real world.

Over the course of 127 pages of lucid prose filled with sharp argument (an additional 97 pages are notes and bibliography), Dibadj systematically examines regulation, its challenges and purpose, and its future. It does so in three parts: the first part is composed of three chapters. Chapter One reviews the history and traditional justifications for regulation. The second chapter examines the trashing of regulation. Dibajd undertakes this task in two steps – by evaluating the merits of the critiques and identifying the ideological attacks of neo-classical economics as exemplified by the Chicago School and Public Choice. The third chapter identifies the elephant in the room in its title: “Where is society left?”

The first chapter of Part Two, Chapter 4, moves into a more sophisticated critique of the essentially faith-based economics of Chicagoan and contractarian theorists. Given the loud volume of the Chicago School’s voice, the five subsections of this chapter “Worshipping efficiency, downplaying transactions costs, ignoring behavioural biases, preordaining entitlements and normativity as science” are as important as they are clear.

Chapter 5 rescues the important aspects of economics for regulation. In particular, it looks at core theory and behavioural economics, areas in which economics has promise, and the peculiarities of new economy industries which have special needs. Part Three proposes some desperately needed new ideas for reform. Rather than facile re-engagement of old political and ideological debates in new clothing, he [*633] examines the contours of his recommendations in real life contexts.

One of Dibadj’s significant contributions is here. It is particularly interesting because not only has he demonstrated the misguided critiques of traditional economic and identified insights from new economic thinking, but he has used those new insights to provide a new way of thinking about regulatory problems and their solution. For example, noting occurrence of the self-serving bias and group think identified by psychologists, Dibadj suggests the interposition of parties designed to interrupt the group and challenge boards of directors. (pp.104-11).

Another example is his suggestion that rather than using low probability/ high penalty regimes, popular with “law and order” rhetoric which psychologists tells us are not effective in changing behaviour, he suggests using the more effective high visibility/ high probability/ lower penalty regime. Such suggestions while seemingly obvious run against entrenched practices and populist political rhetoric. Nevertheless, they are important innovations for re-working regulatory practice – with potential in various types of regulatory activity from street crime to SEC work on Wall St. The final chapter examines the institutional constraints and possibilities. He raises the challenges of biases effecting government regulators, the role of the courts in regulating society, and the challenges regulation poses for democracy.

Dibadj’s mastery of the arguments of the ideologues, demonstrated understanding of the real issues of governance in complex societies and markets, and deep understanding of the main thinkers in the space, from Alfred Kahn and Coase to Williamson, are thrilling. Far from an apology for either deregulation or further regulation, he asserts “the real trend may be toward privatization – not toward deregulation per se.” (p. 127)

His analysis of Richard Posner’s work is insightful, forthright and re-freshing. He has read Posner carefully and critically, an important task for anyone seeking to understand the Chicagoan faith. He uses Posner’s own words, and examines Posner’s position with regards to those he claims to be following such as Coase and Kahn. Demonstrating a more nuanced understanding of Chicagoan heroes, Dibadj undermines Posner’s facile, reductionist positions. For example, rather than taking Posner’s rational wealth maximising model as a valid assumption for law and economics, Dibadj returns to Coase who stated: “the rational utility maximizer of economic theory bears no resemblance to the man on the Clapham bus or, indeed, to any man (or woman) on any bus. There is no reason to suppose that most human beings are engaged in maximizing anything unless it be unhappiness, and even this with incomplete success” (p.52). He argues using Coase and Smith, again for example, to lead to his conclusion about the scientistic nature of law and economics that “zero transaction costs have become to the Coase theorem what atomistic competition is to the ‘invisible hand’: over time, drifting apart from their hypothetical roots, each has become misused ideological dogma” (p.50).

There are limitations to the work. In terms of structure, the powerful set up in the first part of the work is not followed [*634] as fully as this reviewer would have liked in the second part. The comprehensive, subtle analysis of the presuppositions of the louder voices of Chicago and anti-public advocates provided a base for a larger analytical framework and regulatory agenda. However, Dibadj restricted his work to regulation in the same space and with variants – admittedly considerably more sophisticated variants – of economic theory. This decision while understandable given the capture of regulatory discourse by economics, is unfortunate, given the breadth and depth of Dibadj’s understanding.

In terms of substance, a more detailed analysis of the works examined would have been helpful. While there is no doubt he has identified all the main contours and done so masterfully, working through the arguments and issues in greater detail would have strengthened his arguments and position. Second, the narrow US view of regulation taken – i.e. as a second branch of anti-trust, is unfortunate. Had Dibadj more broadly conceived of regulation, his critique and prescriptions would have considerably more scope. While some of his examples extend to matters such as the FDA and telecommunications, casting a broader definition would have led to a broader conception of not only the critique but the range of applicability of the innovative approaches he suggests. Finally, in matters of form, at times Dibadj’s writing appears slightly flippant. While it is engaging to have rhetoric such as Coase’s comment quoted above, it can detract from the important project he has set himself. It may mislead readers into thinking Dibadj is a polemicist – as anyone not committed to a conservative political agenda examining much of the regulatory scholarship may find themselves tempted.

All in all, this is an important, interesting and informative book written in an engaging accessible manner. This reviewer sat down and read it easily and fruitfully in the course of two days. Dibajd is to be commended on making this difficult theoretical terrain readily understandable and proposing such a promising way out of the quagmire created by people whose political commitments overcome their commitment to scholarship. Dibadj observes that democracy can only occur in the context of Habermas’ conditions: “between actors who… want to reach an understanding… and expect one another to take position on reciprocally raised validity claims” (p.124). Dibadj’s work offers a significant step toward creating the conditions.